Iowa hospital to pay huge settlement to resolve False Claims Act probe

September 23, 2009  |  Class Actions, Press Releases, Whistleblower/Qui Tam

Covenant Medical Center in Waterloo, Iowa has consented to pay a hefty settlement to quiet allegations that it submitted improper claims to Medicare, in violation of the federal False Claims Act. The government’s investigation centered around financial relations between Covenant and five physicians, which transactions were prohibited under the Stark Law. That statute prevents a hospital from profiting by treating patients who are referred by a physician to whom the hospital pays compensation that is not commercially reasonable. The purpose of the Stark Law is to ensure that a doctor’s medical judgment is focused solely on the patient, and not on improper financial incentives.

Five doctors employed by Covenant, alleged the government, referred patients to Covenant and in exchange, were paid far more than fair market value and received commercially unreasonable compensation. Indeed, the physicians were among the highest paid hospital-employed physicians not just in Iowa, but in the entire United States.

For the full story, go to Department of Justice’s Press Release.

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